Attorney General Lockyer Files Lawsuit Against Maker of Skoal for Violating Sponsorship Limits

(SAN DIEGO) – Attorney General Bill Lockyer today filed a lawsuit against U.S. Smokeless Tobacco Company (USSTC) alleging the firm has violated a landmark 1998 national settlement by promoting its Skoal brand through sponsorship of National Hot Rod Association (NHRA) drag racing events at which youths compete.

“Where our children are contestants, smokeless tobacco companies cannot be sponsors. It’s that simple,” said Lockyer. “The terms of the 1998 settlement could not be clearer. The objective could not be more important: protecting the health of our kids.”

USSTC in 1998 signed the Smokeless Tobacco Master Settlement Agreement (STMSA), reached in conjunction with a separate national settlement between tobacco companies and the states. Among other marketing restrictions, the STMSA prohibits companies from “any brand name sponsorship in any state” of events in which any contestants are youths (under 18).

USSTC has used its Skoal brand to sponsor NHRA’s POWERade Drag Racing Series and Sport Compact Series events. Both sponsorships began in 2004. The POWERade agreement remains in effect, while the Sport Compact arrangement was terminated at the end of 2004. The sponsorship agreements differ for various NHRA events. But taken together, they have allowed USSTC to advertise pervasively at sponsored races. Under the varying arrangements, USSTC has placed large “Skoal Racing” sign across the bottom of big-screen video displays at events, placed semi-permanent signs on both sides of drag strips, and broadcast public address announcements at events.

Drivers under 18 competed at both POWERade and Sport Compact events sponsored by Skoal, the complaint alleges. NHRA Jr. Drag Racing League drivers as young as nine competed at Skoal-sponsored events in November 2004 at the Pomona Raceway. Because youths under 18 were contestants, the complaint alleges, Skoal’s sponsorship of the events violated the STMSA.

USSTC’s actions in connection with the Skoal sponsorship of NHRA events violated other provisions of the STMSA, according to the complaint. Those alleged violations include: paying to display the Skoal brand name on drag racers; selling clothing or other merchandise bearing the Skoal brand name; placing the Skoal brand name on outdoor advertising; and engaging in more than one brand name sponsorship in one year.

Lockyer’s complaint asks the court to impose an unspecified amount of monetary penalties and issue an order barring USSTC from further violations of the STMSA.

To help illustrate the importance of the case, the complaint notes USSTC’s web site bills the company as the “world’s leading producer and marketer of the only growing segment of the tobacco industry, moist smokeless tobacco.” The web site claims USSTC sells more than 1.7 million cans of smokeless tobacco every day, and about 650 million cans annually.

Regarding Skoal, the web site calls the brand “the No. 1 flavored moist smokeless tobacco on the market,” with annual retail sales exceeding $1 billion. Government statistics, meanwhile, show youths who use smokeless tobacco disproportionately favor Skoal. In a 2003 survey conducted by the U.S. Department of Health and Human Services, 35 percent of minors aged 12-17 indicated they preferred Skoal over 14 other popular brands.

In 1999, Lockyer established a full-time Tobacco Litigation and Enforcement Section to enforce California laws regarding the sale and marketing of tobacco products. The section also enforces the national Master Settlement Agreement (MSA) reached with tobacco companies in November 1998.

Californians who suspect violations of state tobacco laws, or the STMSA or MSA, can file complaints by calling 916-565-6486 at any time, or by writing to the Tobacco Litigation and Enforcement Section at P.O. Box 944255, Sacramento, CA 94244-2550. Additional information is available on the Attorney General’s web site at http://www.ag.ca.gov/tobacco/ .